Double Tax Avoidance Agreement Template for Malaysia

The Double Tax Avoidance Agreement is essential for businesses and individuals operating between Malaysia and other jurisdictions, serving to prevent income from being taxed twice in different countries. This document becomes relevant when entities or individuals have tax obligations in both Malaysia and the partner country, providing clear guidelines on which country has the right to tax different types of income. The agreement includes detailed provisions for various income types, permanent establishment rules, residency criteria, and methods for eliminating double taxation. It also establishes procedures for information exchange between tax authorities and dispute resolution mechanisms, incorporating both Malaysian tax law principles and international tax treaty standards. This type of agreement is particularly crucial for encouraging international trade and investment while preventing tax evasion and avoidance.

1. Parties: Identification of the contracting states entering into the agreement

2. Background: Context and purpose of the agreement, including the desire to prevent double taxation and tax evasion

3. Definitions: Comprehensive definitions of terms used throughout the agreement, including 'resident', 'permanent establishment', etc.

4. Scope of the Agreement: Types of taxes and persons covered by the agreement

5. Residence: Rules for determining tax residence and handling dual residence situations

6. Permanent Establishment: Definition and conditions constituting a permanent establishment

7. Income from Immovable Property: Taxation rules for income derived from real estate and natural resources

8. Business Profits: Rules for taxation of business profits and attribution of profits to permanent establishments

9. Associated Enterprises: Provisions dealing with transfer pricing and related party transactions

10. Dividends, Interest, and Royalties: Taxation rules for investment income and intellectual property payments

11. Capital Gains: Treatment of gains from alienation of property

12. Employment Income: Taxation of salaries, wages, and other employment remuneration

13. Elimination of Double Taxation: Methods for avoiding double taxation through credits or exemptions

14. Non-discrimination: Provisions ensuring fair treatment of residents of both states

15. Mutual Agreement Procedure: Procedures for resolving disputes between tax authorities

16. Exchange of Information: Framework for information sharing between tax authorities

17. Entry into Force: Provisions regarding when the agreement becomes effective

18. Termination: Conditions and procedures for terminating the agreement